This morning at 9:00 am in the Orange County Convention Center, Aon unveiled its “2009 Global Risk Management Survey” and — unsurprisingly — fear of economic slowdown ranked as the number one concern for the 500-plus global organizations that responded. Stephen Cross, CEO of Aon Global Risk Consulting and one of the presenters detailing the survey results for the some 50 people attending the session, illustrated the largest concern for risk professionals if the slowdown continues to worsen.
“One outcome might be cost-cutting in risk management, which would be unfortunate,” said Cross. “We may be dealing with a situation where you have to do more with less.”
And as anyone who has ever tried likely already knows, you can’t do more with less; you can only do less with less.
The report went into more detail:
“Perhaps the most difficult risk management issue we face amidst this turmoil is ensuring that organizations remain committed to established, effective risk management strategies. Seeking short-term gains may restrict or reduce the long-term success of risk management programs. Risk controls, for example, should not be ignored for the sake of immediate expense cutting as they are essential to long-term cost mitigation.
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Following the threat of a deeper global recession on the list of top risks came some other familiar suspects, as well as a few concerns that didn’t even register in last year’s top ten. Here’s the full breakdown.
1. Economic Slowdown
2. Regulatory/Legislative Change
3. Business Interruption
4. Increasing Competition
5. Commodity Price Risk
6. Damage to Reputation
7. Cash Flow/Liquidity Risk
8. Distribution or Supply Chain Failure
9. Third Party Liability
10. Failure to Attract or Retain Top Talent
In addition to tallying these results, Aon also asked companies how prepared they were for each of these risks. Shockingly, 60% said they were ready for the economic slowdown — something that sounded particularly dubious to Cross. “I was very surprised to see that 60% of people reported they were prepared for the economic slowdown because I’ve yet to meet this 60%,” said Cross. “If Warren Buffet lost billion personally, I don’t know where these 60% of people are.
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To me, the realities of the economic slowdown are undeniable and even the most optimistic of economists seem to put the global recovery coming no sooner than early 2010. The inevitable and likely-soon-coming regulatory backlash from the financial sector meltdown, however, seems even more unpredictable. After AIG’s bonusgate plus the general populist outrage against everything from banks to carmakers, who really knows what Congress is going to draft?
Cross aptly summed up this fear. “It’s possible that the reaction may be over-reation.” Or as the report termed it:
“In the wake of the global economic crisis, an increase in regulation within the financial sector is widely anticipated; however, it is still unclear whether more stringent regulation will expand to other industry sectors. For multinationals, the cost, quantity and complexity of regulations presents serious challenges in terms of managing compliance with regulatory risks.”
Cross’ co-panelist Theresa Bourdon, who serves as Group Managing Director of the Americas for Aon Global Risk Consulting, raised another interesting concern. “The risks for companies is the inability to comply with these regulations, ” she said. “If you don’t comply, the penalties can be severe…More importantly, there is a lack of market share and reputation.
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The panelists went on to discuss the new realities of supply chain risk and some emerging issues reported in business interruption. For even more info, read the full report.
And in other Aon-related news, you can also check out all the company’s RIMS 2009 events and activities over at its “Client World” website where the company is providing real-time updates from Orlando. You can also follow Aon live at RIMS 2009 on Twitter at @AonCorp.